EU Preferential Trade Regime To Be Improved

by Ulrika Lomas, Tax-News.com, Brussels

20 April 2011

The European Union has launched a process which it believes will allow for the easier operation of preferential trade between itself, the Southern Mediterranean and the Western Balkans, by overcoming many of the current difficulties caused by the management of a large variety of bilateral agreements.

The European Council agreed on April 15 to authorize the EU's signature of a regional Convention on pan-Euro-Mediterranean preferential rules of origin. The Faroe Islands, the European Free Trade Association States States, Turkey, the southern Mediterranean partners participating in the "Barcelona Process" and the Western Balkans are all parties to the Convention.

The Convention will replace the current pan-Euro-Mediterranean system of rules of origin based on individual protocols applicable between two partner countries with a single legal instrument in the form of a regional convention on preferential rules of origin. It is hoped that the Convention's implementation will overcome the difficulties in the management of the current network of some 60 bilateral protocols on rules of origin among the countries or territories of the pan-Euro-Mediterranean zone.

The decision follows a call made in late March by the European Council for the rapid development of a new partnership with the region, based upon broader market access, economic integration and closer political cooperation. The EU's existing preferential trade agreement system is complex, as a product must originate from one of the partners to the agreement, in order to benefit from preferential duty rates. According to the EU, this means that sufficient working or processing must take place in the originating country during the course of production.

The EU argues that the Convention's framework will greatly facilitate the adaptation of rules of origin to reflect technological evolution. Most importantly, perhaps, the Convention is designed to substantially reduce levels of bureaucracy and ease the complicated manner in which changes to the rules within the cumulation zone are carried out. Currently, any amendment requires the alteration of approximately 60 other bilateral agreements.

Commenting on the Council's decision, Stefan Füle, Commissioner for Enlargement and European Neighbourhood Policy said that: "This may seem a very technical matter, but in reality this opens the door to a simplification of the way the EU can trade with the countries of the Southern Mediterranean and the Western Balkans. It will help to develop growth and economic prosperity for the region and will facilitate regional integration, thus contributing to the overall stability of the whole region."

Füle's statements were echoed by Taxation Commissioner Algirdas Šemeta, who stressed that: "This customs agreement will facilitate trade at regional level and the commercial exchanges between those partner countries and the Union for the benefit of their businesses and citizens".

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